Mutual Fund

What is Mutual Fund ?

Mutual funds are investment companies that pool money from investors at large and offer to sell and buy ba ck its shares on a continuous basis and use the capital thus raised to invest in securities of different companies.

Mutual funds can be either or both of open ended and closed ended investment companies depending on their fund management pattern. An open-end fund offers to sell its shares (units) continuously to investors either in retail or in bulk without a limit

on the number as opposed to a closed-end fund. Closed end funds have limited number of shares.
Do check our various knowledge inputs for understanding the mutual fund & benifits of investing in it-

  • A mutual fund is a pool of money collected from investors with similar investment goals.
  • The money is invested in various securities depending on the objectives of the mutual fund scheme.
  • The profits or loss are shared among the investors in proportion to their investments.

Where do mutual funds invest ?

  • Stocks (shares) – Equity Fund
  • Bonds – Debt Fund
  • Money Market Instruments (treasury bills, certificate of deposits and inter-bank call money) – Liquid Fund.

Benefits of Mutual Fund

  • Professional Management by Fund Managers
  • Portfolio Diversification
  • Reduction in Risk
  • Liquidity and Convenience
  • Tax Benefits
  • Market Related Realistic Returns

Systematic Investment Plan - SIP

  • SIP is most favorable option for salaried people.
  • In this, instead of doing lump sump investment you have a choice to do monthly, quarterly, half yearly or yearly investment with as low as Rs.500, similar to recurring deposit.

Does your money get locked in Mutual Funds ?

  • There is complete liquidity in open-ended schemes where investors can withdraw their money or buy new units all throughout the year.
  • While in Equity Linked Savings Schemes (ELSS), there is a lock-in period of 3 years.

Are Equity oriented MF risky ?

  • The value of the equity oriented schemes depends on the Net Asset Value (NAV).
  • The value of the equity holdings in the scheme can come down due to a fall in the prices of shares, and this in turn, may result in a fall in the NAV. But in long term such apprehensions are baseless.
  • In long term, mutual funds generally fetch more than 45% returns approximately

Is it a good strategy to invest during a fund launch (NFO)?

  • Generally it has been portrayed that the investor will lose out in case of investment not made during the initial offer period, but it is the time when we should include the most worth and potential scheme in our portfolio.
  • Instead of focusing that NFOs are available at just Rs.10/- , an investor should be wise enough to look at the theme, objective, proposed investment style and the future prospects of the NFO and choose them accordingly.

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